Glencore and Xstrata approve all-share merger

The Glencore Directors and the Independent Xstrata Directors have reached an agreement on the terms of a recommended all-share merger of equals.

The following is a brief summary of the deal:

• Creation of a major natural resources group with a combined equity market value of US$90bn and a unique business model, fully integrated along the commodities value chain, from mining and processing, storage, freight and logistics, to marketing and sales
• Merger ratio of 2.8 New Glencore Shares for every Xstrata Share held, excluding Xstrata Shares already owned by the Glencore Group, providing Xstrata Shareholders other than Glencore with a 45 per cent. stake in the Combined Entity
• The Merger values each Xstrata Share at 1,290.10 pence and the entire issued and to be issued share capital of Xstrata at approximately £39.1bn (US$61.9bn) and represents a premium of:
• Approximately 15.2 per cent. to Xstrata’s closing share price of 1,119.50 pence as at 1 February 2012, being the last business day prior to the announcement by Xstrata that it was in discussions with Glencore; and
• Approximately 27.9 per cent. to Xstrata’s volume weighted average share price of 1,008.91 pence over the three-month period ended 1 February 2012, being the last business day prior to the announcement by Xstrata that it was in discussions with Glencore
• Management team to be led by current Xstrata CEO, Mick Davis, as CEO of the Combined Group, Ivan Glasenberg, current Glencore CEO, as Deputy CEO and President, Trevor Reid, current Xstrata CFO, as CFO and Steven Kalmin, current Glencore CFO, as Deputy CFO
• Estimated annual EBITDA synergies of at least US$500mn in the first full financial year of the Combined Group, predominantly marketing related
• Expected to be earnings per share accretive to Xstrata Shareholders in the first full financial year of the Combined Group1
• For the 12 months ended 31 December 2011, Glencore generated revenues of US$186.2bn and adjusted EBITDA (before exceptional items) of US$6.5bn
• For the 12 months ended 31 December 2011, Xstrata generated revenues of US$33.9bn and EBITDA (before exceptional items) of US$11.7bn
• On a combined basis for the year ended 31 December 2011, the Combined Group would have generated revenues of US$209.4bn and adjusted EBITDA of US$16.2bn
• The Merger will be effected by means of a Court sanctioned scheme of arrangement of Xstrata under Part 26 of the UK Companies Act, pursuant to which Glencore will acquire the entire issued and to be issued ordinary share capital of Xstrata not already owned by the Glencore Group